European Commission Economic Sentiment Indicator, March 2023: The European Commission (EC) draws from a range of surveys to construct confidence indicators for six sectors of the economy and then uses five of these (financial services is not part of the calculation) to make up its Economic Sentiment Indicator (ESI).
The March* report shows a small decline in the ESI for both the EU and the Euro-zone, meaning it is now 9 months since it was above the long-run average. Among the sectors, there was a fall in confidence for industry, retail trade and construction (although the latter remains the strongest of the sectors) with virtually no change for services or consumer confidence.
Despite the fall in industrial confidence, the measure is still above the long-run average – indeed it is only the severely negative reading for consumers confidence that is keeping the overall ESI below 100. The main reason for industry confidence slipping again was a further downgrade of the survey’s respondents’ assessments of expectations for output over the coming 3 months, with their views on current order books also slightly weaker; their assessments of stocks of finished products were broadly stable. The other two questions which are reported but not used in calculating the ESI showed a dip in production levels over the past three months but export order books edged up.
There is a range of trends when you break the analysis down by country. Among the largest EU economies, there was a sharp increase in the ESI in Italy, with more modest increases in Netherlands, France and, to an even lesser extent, in Poland; the ESI in Spain and Germany was broadly unchanged from the previous month.
The ESI is calculated against a base set by the long-run average reading so this is adjusted marginally each month when the new reading is recorded. A majority of the countries continue to have an ESI below their long-run average with Bulgaria, Croatia, Cyprus, Greece, Italy, Malta, Portugal and Romania the exceptions whose reading is above 100; the EU candidate countries also participate in this survey and Albania and Montenegro also have an ESI reading above their long-run average.
* Note that although dated March, the data collection period was from 1st to 23rd of the month, so the trends really refer to February and the 3-month periods around this month.
You can download the EC report and statistical annex from their web-site at https://ec.europa.eu/info/business-economy-euro/indicators-statistics/economic-databases/business-and-consumer-surveys/download-business-and-consumer-survey-data/press-releases_en or you can request it from MTA.
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CECIMO Economic & Statistical Toolbox, 4th Quarter 2022: The latest edition of the CECIMO Toolbox was released this week. The Toolbox document groups information into 6 categories covering historical data for the sector, demand, investment, the business climate, general economic indicators and information on related sectors. The date reference refers to the main period covered by this edition, although some more recent data is included for a couple of the series.
The highlights of the latest report include:
- Orders for machine tool manufacturers in the CECIMO8 group (which covers the major producing nations as a single figure) grew strongly, driven by the domestic market in these countries. For 2022 overall, orders increased by +11% compared to 2021.
- Machine tool production across the CECIMO area (15 European countries) is estimated to have reached more than €25 billion in 2022. This is the highest since the start of the pandemic and an increase of +11% on the 2021 figure, but it is still some way short of the previous peak of €28 billion recorded in 2018.
- The Purchasing Managers Index (PMI) in most CECIMO countries is still in negative territory, despite the global measure getting back to exactly 50 in February.
- European and global growth prospects for 2023 have been revised slightly upwards thanks to developments including a reduced risk of gas shortages in Europe and a possible advance in domestic and foreign demand.
You can access the Toolbox via the CECIMO website at https://www.cecimo.eu/economic-data/toolbox/ (unfortunately, the file is too large to attach to this report) – please indicate that you are a member of MTA when requesting a copy; alternatively, we can try to email this if you contact Geoff Noon (email: [email protected]) but this is a large file that may get blocked by some systems.
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USMTO and CTMR, January 2023: The US Manufacturing Technology Orders (USMTO) programme tracks orders in the US market, based on the reports from participants. January 2023 saw a reduction of -17% compared to December 2022 but, perhaps more importantly, a fall of -20% compared to a year earlier.
However, demand in the US was still strong at the start of last year and the press release from our colleagues at AMT notes that the latest figure is above the long-run average for January. The 12-month rolling trend is also down with a fall of -9% being recorded when compared to the previous block of 12 months.
The press release also notes a number of trends in the recent data, including a significant increase in orders for 5-axis machining among job shops (sub-contractors) and opportunities coming up in the mining and construction sectors thanks to projects to develop a new oilfield and to expand mining of lithium.
Although it is dangerous to make judgements based only on one month, it is worth noting that there is a divergence of trends between the six regions in the report. There were significant reductions (compared to January 2023) in the South-East, West and North-Central-East areas, a little growth in the North-East and North-Central-West and a strong improvement in orders in the South-Central region.
The US Cutting Tool Market Report (CTMR) tracks orders for tooling on a similar basis. In contrast to the machine side of the sector, cutting tool consumption increased by +4% compared to December 2022 and was +23% higher than a year earlier; the 12-month rolling trend grew by +12% compared to the previous 12-month block.
The press release for this survey notes that part of this growth is down to inflation but also suggests that “incoming new order activity remains at a good level”. There is no regional analysis for the cutting tool report.
You can download the press releases for the two surveys from the AMT web-site at www.amtonline.org/topic/intelligence, with the CTMR release also published on the USCTI web-site at www.uscti.com; alternatively, you can request either or both releases from MTA and we can make sure you get them when they are published each month.
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Euro-zone Investment & Profitability, 4th Quarter 2022: Data from Eurostat shows a sharp fall in the investment rate of non-financial corporations in the Euro-zone with a decline from 25.4% in the 3rd quarter of 2022 to 23.5% in the last period of the year. Although the Q3 figure was distorted by large imports of intellectual property products which exaggerates the reduction at the end of the year, the latest figure is the weakest of 2022 and the lowest since the 3rd quarter of 2021.
The investment rate is defined as gross fixed capital formation divided by gross value added; the fall in the 4th quarter was due to a combination of an increase in gross value added and a decline in gross fixed capital formation.
In contrast, there was a sharp increase in the profit share of non-financial corporations in the Euro-zone; this increased to 42.0%, the highest value since 2007.
The profit share of non-financial corporations is defined as gross operating surplus divided by gross value added. This indicator shows the share of the value added created during the production process remunerating capital. It is the complement of the share of wage costs (plus other taxes less other subsidies on production) in value added. The increase in the latest figure came as gross value added increased (as it had done throughout 2022) accompanied this time by a small fall in the compensation of employees (wages and social contributions) plus taxes less subsidies on production.
For more details, you can download the Euro-indicators report from their website at https://ec.europa.eu/eurostat/news/euro-indicators (5 April).